Auckland port CEO Roger Gray says business users will be billed for a new safety permit. Photo / Dean Purcell
People who use the Port of Auckland to make money will be paying more for the privilege soon as New Zealand’s main imports gateway raises charges in pursuit of a performance turnaround.
Container-using importers and exporters and their agents, break bulk (non-container) and bulk cargo movers and those who shift cargo by rail will pay more from early next year after the Auckland Council-owned port reviewed its “public tariff” rates.
Port chief executive Roger Gray said some of the price rises are to recover inflation costs but the company was introducing “additional, mostly land-based charges designed to have those people who use the port to make money contribute to the port’s profitability”.
Overarching a slew of new individual category charges is a general price increase of 7 per cent from January 1.
“We do intend to use revenue growth as a way of ensuring we return a fair return to our shareholders, because right now, we continue to deliver less than our weighted cost of capital. Because of that, quite rightly, our owner may not choose to reinvest and we need to reinvest all the time in the assets so it’s pretty important to start to return a fair return to the owner,” Gray told the Herald.
Today more than 900 businesses accessed the port’s operations.
“We were making a loss at the container terminal at a fully-absorbed costing and we need to turn that around otherwise ratepayers are subsidising importers and exporters,” Gray said.
Gray said the flipsides of the increases were that demurrage (late pick up) charges to customers were down $25m at the port this year due to unclogging of the supply chain post-pandemic, and the port was more efficient.
Port of Auckland is on a mission to become what Gray calls New Zealand’s “premium import port” as it continues the job he was employed early last year to do - turn around the port’s long-running poor operational and financial performance and dismaying health and safety record. That performance included many millions of dollars lost on a failed container terminal automation project that was abandoned last year. But the port is still paying for that project, and, according to a port advisory to customers on the price increases, so are port customers.
The port and its performance is also under the gimlet eye of Auckland mayor Wayne Brown. A plank of his election campaign was making the port start paying its way and reducing its CBD operational footprint so Aucklanders could make greater use of its premium waterfront land.
Asked what he meant by the “premium” import port aspiration, Gray said the goal was “to run a very efficient port where we will charge and provide services customers value and are prepared to pay for”.
“Increasing volumes through the port, having ships on time, making sure we deliver on what customers want.
“We’re in the process of sitting down with customers over the next few months and asking what do you actually want from us. Is it volume? Is it on-time performance, is it both? What’s your priority, what is really critical?”
In an advisory to customers on the price increases, the port said as a group, it had around $1.6 billion of assets. These needed to generate a return of $80m-$100m net profit after tax annually to replace assets as they wore out.
“A business that does not generate sufficient return will ultimately be forced to close, which is clearly not acceptable for a key supply chain link such as a port. We need to apply higher increases to some charges so that we can generate a fair return on investment.”
Highlights of the nearly four pages of price changes sent to customers include a $30 per container increase in peak season landside access fee, from $65 to $95, plus a $20 per container increase in off-peak time and from January 1, the port will introduce a $20 per container rail handling charge.
From March 1, the port will introduce landside access fee charges per truck load for break bulk and bulk cargo movements. It has advised customers it will confirm a price per truck load by the end of next month.
To improve safety, the company is bringing in an “authority to work” access permit for all businesses that enter the port.
Effective from January 1, this permit will cost $750 to set up per application.
CBAFF, the federation which represents many of the country’s freight forwarders, operators who handle cargo movement for importers and exporters, said the port believed the pricing adjustments were critical in working towards a fair return on the port’s asset and to their shareholders.
“However, we are mindful that increases will impact on the importing community and, New Zealand consumers. We also believe if the port is investing wisely and promoting efficiency through continuous improvements, the return on investment will be received,” said chief executive Sherelle Kennelly in a statement.
The port was working closely with CBAFF, she said.
“The port’s vision is to be a port that is sustainably profitable, delivering a fair return for stakeholders, whilst remaining the preferred port .... their purpose is to facilitate a sustainable growth of trade for Auckland and the North Island. The port’s location is unique and certainly an asset worth of investment for our future.”
The second stage of an infrastructure levy introduced in January last year will also come into play on January 1.
The port introduced the levy “to replace, upgrade and maintain and increase capacity”.
It intended to apply the fee in two parts aligned to a $330m investment in the controversial container terminal automation project, which involved a third container berth and three new cranes.
The second stage was to come in once the $330 million automation project was completed. The second stage would cover the investment in the automation software and automated straddles, the price advisory to customers said.
The project, the cost of which was kept secret until last year, failed to be implemented more than six years after it was spearheaded by former chief executive Tony Gibson and the former port board. It was abandoned last year after Gray started.
The port last year wrote off $65m of investment in the vexed project. But as the Herald revealed earlier this year, at least another $16m can be added to the bill. The decision to abandon and revert to a fully manual operation left the port with 27 new straddle carriers designed for an automated system. To be of any use, they must be converted for manual driving.
In the price rise advisory to customers, the port said “we are now at the point where we will soon begin converting the automated straddles into manually driven straddles, with the conversion expected to be completed in mid-2025″.
To support the existing straddle fleet, five new manual straddles had been purchased. This, and other investments for the container terminal, had triggered the second stage of the infrastructure levy.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
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